us economy review and forecast general review 2012
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e-forecasting.com\'s overview of the US and global economic climate, with short and long term projectionsTRANSCRIPT
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Economic Review and Forecast: You Might Need These
e-forecasting.com’s outlook for US and global economic conditions
Friday, February 10th, 2012
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Presentation Agenda
New stylized facts in global trends
Snapshot of current economic climate: from stagnation to stagflation
Future outlook
Q&A
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State Capitalism & Global Competition
state-backed companies account for 80% of the value of China’s stock market and 62% of Russia’s
Not a road to liberal capitalism
A sustainable model New view: redesign
capitalism to make it work better
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The Rich is the Problem
99% vs. 1% Take their money Global anarchy Instability Uncertainty Lack of investment No job creation Erosion of wealth Decline in incomes
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Jobs: Cooking The Numbers
Labor Force = Employed + Unemployed
Unemployed: 10 million
Labor Force: 100 million= 10%
Unemployed: 10 mil. - 1 mil.
Labor Force: 100 mil. - 1 mil.= 9.1%
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FED, ECB, BoE, BoJ…. & IMF
Experiments with monetary policy
Took over fiscal policy from inept political leaderships
New asset bubbles? Do they rule? Are they doctors or
patients
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Fifty Years of the European Socialist Experiment
Spend other peoples money
Hire the unemployed
Does government create wealth?
The end of the social state?
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Current Risks
Ineffectiveness of low interest rates
Capping inflation at 2%
Negative saving rates
Deficits, Debts and Fear – The European experience
Free Fall of dollar, panic, policy reversal, high interest rates, a “real” depression
Geopolitical factors, Iran conflict & oil prices
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Fed in a printing mode again
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Employment: Where is the New Peak
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Real-Time Look @ Economy NOW
What is happening RIGHT now with the economy– US monthly GDP, current macro
components, policies, etc
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Real Time Monthly GDP
• e-forecasting estimates US monthly GDP increased 2.8% in January to $13,487.6B, after jumping 3.4% in December
• Current annual growth rate in first quarter is estimated to be 2.9% (Nov, Dec, Jan average)
• Six-month growth rate, which signals confirmation of turning points, went up 2.4% in January, after going up 2.2% in December
$13,100
$13,200
$13,300
$13,400
$13,500
M J Q2 J A S Q3 O N D Q4 J
Monthly GDP Up in January
BEA, Quarterly e-forecasting, Monthly
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Growth in Monthly GDP
Looking @ growth rate, can see depth of previous recession, upswing, and now slow recovery in economy
When negative, recession; when positive, expansion
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-8.0
-4.0
0.0
4.0
8.0
12.0
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
%
Growth in U.S. Monthly GDP
NBER-Defined U.S. Recessions
Six-Month Growth Rate Smoothed, Annualized
Long-Term Growth Rate: 3.3%
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Historical View
Taking the current recession in context over a long history, we can see how deep the recession was as well as the length (solid fill) and current recovery $2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
BillionsMonthly GDP & US Business Cycle
NBER-Defined U.S. Recessions
Real GDP, at Seasonally Adjusted Annual Rates (SAAR)
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Q4 was fastest quarter last yearLooking @ table, we see growth rates incrementally increasing over the last 12 months
Year Month
Quarterly GDP Monthly GDP
Chained $2005 annual % change Chained $2005 annual % change annual % change MA3
SAAR*, Billions from quarter ago SAAR*, Billions from month ago from 3 months ago**
2011 January $13,225.0 ▼ -1.4% 1.9%
2011 February $13,224.5 ▬ 0.0% 1.2%
2011 March $13,227.9 0.4% $13,234.1 ▲ 0.9% 0.4%
2011 April $13,259.8 ▲ 2.4% 0.4%
2011 May $13,266.9 ▲ 0.6% 0.7%
2011 June $13,273.3 1.4% $13,293.1 ▲ 2.4% 1.4%
2011 July $13,308.9 ▲ 1.4% 1.5%
2011 August $13,326.8 ▲ 1.6% 1.7%
2011 September $13,331.6 1.8% $13,359.1 ▲ 3.0% 1.8%
2011 October $13,391.0 ▲ 2.9% 2.1%
2011 November $13,419.3 ▲ 2.6% 2.4%
2011 December $13,422.4 2.8% $13,456.9 ▲ 3.4% 2.8%
2012 January $13,487.6 ▲ 2.8% 2.9%
*SAAR: Seasonally Adjusted Annual Rate.
**MA3: 3-month moving average monthly GDP. End-month of quarter growth rate is the same as the annual quarterly growth rate.
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Short-Term Outlook: US Lead
Using leading indicator helps with short-term forecast and turning point identification
US leading indicator has been slowly picking up steam the last few months
0
20
40
60
80
100
120
59 63 67 71 75 79 83 87 91 95 99 03 07 11
© 2012 e-forecasting.com
e-forecasting Leading Economic Index (eLEI)
U.S. Recessions* eLEI, 2000=100
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Short-Term Outlook: US Lead
Six month growth rate at highest level since May 2010
Currently at 5.9% Has increased last
3 months in a row-20
-10
0
10
20
59 63 67 71 75 79 83 87 91 95 99 03 07
Expansion and Recession Signals from Growth in eLEI
Six-Month Growth Rate Smoothed, Annualized, in eLEI
U.S. Long-Term Growth Rate: 3.3%
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eLEI shows recession probability next 3-4 months at nearly zero
1%
26%
6%
15%
41%
32%
85%
62%
38%
7%
2%
1%
0% 25% 50% 75% 100%
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Recession Probabilities
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Short-Term Outlook: US
Looking at growth in the US economy, we see slow recovery with growth to hit 3% by 2014
-1
0
1
2
3
4
11:Q1 12:Q1 13:Q1 14:Q1
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Economic Growth ForecastAnnual %Change From Previous Quarter
Actual Forecast
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US Manufacturing
80
85
90
95
100
105
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Index, 2007=100
Manufacturing Production
Manufacturing recovery will continue and near peak of 06 by 2014
80
85
90
95
100
105
01:Dec 03:Dec 05:Dec 07:Dec 09:Dec 11:Dec 13:Dec
Index, 2007=100
Manufacturing Production
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US Consumer Prices
Look for sharp increase in inflation due to QE
160
170
180
190
200
210
220
230
240
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Index, 1982-84=100 , SA
Consumer Price Index (CPI)
160
170
180
190
200
210
220
230
240
250
260
01:Dec 03:Dec 05:Dec 07:Dec 09:Dec 11:Dec 13:Dec
1982-84=100, SA
Consumer Price Index (CPI)
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US Durable Goods
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
In Billions, SAAR
Consumer Expenditures on Durables
Consumer expenditures on durable goods will continue to recover nearing $1,500 trillion at 2005 constant prices
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
01:Dec 03:Dec 05:Dec 07:Dec 09:Dec 11:Dec 13:Dec
In Billions, SAAR
Consumer Expenditures on Durables
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Exports Outlook
$500
$600
$700
$800
$900
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
In Billions, SAAR
Real Exports of Manufactures
Exports will remain on a very low growth path
$500
$600
$700
$800
$900
$1,000
$1,100
01:Dec 03:Dec 05:Dec 07:Dec 09:Dec 11:Dec 13:Dec
In Billions, SAAR
Real Exports of Manufactures
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Imports Outlook
Real imports will sharply increase and reach new peak near $1,700 billion
$800
$1,000
$1,200
$1,400
$1,600
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
In Billions, SAAR
Real Imports of Manufactures
$700
$900
$1,100
$1,300
$1,500
$1,700
01:Dec 03:Dec 05:Dec 07:Dec 09:Dec 11:Dec 13:Dec
In Billions, SAAR
Real Imports of Manufactures
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Trade Balance Outlook
Trade balance of manufactures as percent of GDP will sharply increase through forecast horizon
-8
-6
-4
-2
0
2
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Forecast
Percent
Percent of Trade Balance of Manufactures to GDP
-8
-6
-4
-2
0
2
01:Dec 03:Dec 05:Dec 07:Dec 09:Dec 11:Dec 13:Dec
Forecast
Percent
Percent of Trade Balance of Manufactures to GDP
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Monetary Policy on the Horizon
-2
0
2
4
6
8
00:Sep 02:Sep 04:Sep 06:Sep 08:Sep 10:Sep 12:Sep
Percent
Monetary Policy: Federal Funds Rate
Look for the Fed Funds rate to remain near zero through forecast horizon
Bernanke’s ‘pledge’ to hold rates thru 2014
-2
0
2
4
6
8
01:Dec 03:Dec 05:Dec 07:Dec 09:Dec 11:Dec 13:Dec
Percent
Monetary Policy: Federal Funds Rate
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Global Future Outlook
Looking @ major economic blocs and their leading indicators helps give an idea of turning points, which areas suffered more than others and which are recovering…
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World vs. US
The US moves with the world economy, usually the timing of recessions and peaks are the same
While US growth is slowly picking up, world continues to decline
-30
-20
-10
0
10
20
00 01 02 03 04 05 06 07 08 09 10 11 12
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Dynamics of the Global Business Cycle USA Leading Index Moves Up or Down Ahead of the Rest of the World
World, excluding USA United States
Consecutive negative values (below x-axis) predict
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BRIC: Showing Resilience
BRIC HAD been continually outperforming the world and USED TO move out of recession much faster
BRIC recently faced a slowdown but is now turning the corner again
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10 11 12
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in BRIC Area
World BRIC Area
Consecutive negative values (below x-axis) predict recessions
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Latin America’s Bumpy Ride
Latin America’s economy fluctuates much greater than rest of world
Economy is turning out of a slowdown in growth before the world resumes growth
-30
-20
-10
0
10
20
30
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Latin America
World Latin America
Consecutive negative values (below x-axis) predict recessions
-40
-30
-20
-10
0
10
20
30
40
00 01 02 03 04 05 06 07 08 09 10 11 12
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Latin America
World Latin America
Consecutive negative values (below x-axis) predict recessions
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-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Euro Area
World Euro Area
Consecutive negative values (below x-axis) predict recessions
Euro Area
Euro area usually mirrors global economy
This changed last year and was in a free falls, looks to be bottoming out barring any more debt crises
-25
-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10 11 12
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Euro Area
World Euro Area
Consecutive negative values (below x-axis) predict recessions
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-20
-15
-10
-5
0
5
10
15
20
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Non-Euro Area
World Non-Euro Area
Consecutive negative values (below x-axis) predict recessions
Non-Euro Area
Non-Euro area continues to fare much better than Euro area
Slowdown has stalled
-40
-30
-20
-10
0
10
20
30
00 01 02 03 04 05 06 07 08 09 10 11 12
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Non-Euro Area
World Non-Euro Area
Consecutive negative values (below x-axis) predict recessions
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Africa & Middle East
Africa and Middle East moving along with world economy
Economies turning slightly quicker than world
-20
-10
0
10
20
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Africa & Middle East
World Africa & Middle East
Consecutive negative values (below x-axis) predict recessions
-30
-20
-10
0
10
20
00 01 02 03 04 05 06 07 08 09 10 11 12
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Africa & Middle East
World Africa & Middle East
Consecutive negative values (below x-axis) predict recessions
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Asia Pacific
Asia Pacific showed a lot of strength coming out of recession
However, now growth has cooled off and at pre-precession levels
-20
-10
0
10
20
30
00 01 02 03 04 05 06 07 08 09 10
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Asia & Pacific Area
World Asia & Pacific Area
Consecutive negative values (below x-axis) predict recessions-20
-10
0
10
20
00 01 02 03 04 05 06 07 08 09 10 11 12
Leading Indicators: Six-Month Smoothed Growth Rate, Annualized (percent)
Early Warning Signals for Booms and Busts in Asia & Pacific Area
World Asia & Pacific Area
Consecutive negative values (below x-axis) predict recessions
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Emerging Asia once again will carry global economy
2010 2011 2012 2013 2010 2011 2012 2013
0.41 0.35 -0.11 0.16 8.1 9.3 -3.8 4.3
0.28 0.23 -0.15 0.06 5.6 6.1 -5.2 1.7
0.13 0.12 0.04 0.09 2.6 3.2 1.4 2.5
0.29 0.26 0.14 0.18 5.9 7.0 5.1 4.8
0.84 0.53 0.32 0.62 16.7 14.2 11.2 17.0
0.65 0.40 0.23 0.51 13.0 10.7 8.0 13.9
0.39 0.28 0.19 0.21 7.8 7.4 6.6 5.8
0.45 0.07 0.21 0.26 8.9 1.8 7.5 7.0
2.40 2.05 1.89 2.04 47.9 54.5 67.0 55.9
1.92 1.76 1.62 1.75 38.3 47.0 57.4 47.8
0.15 0.15 0.11 0.13 3.0 3.9 4.1 3.6
5.0 3.8 2.8 3.6 100.0 100.0 100.0 100.0
EUROPEAN UNION (EU27)
CONTRIBUTION OF REGIONS TO GLOBAL GROWTH
REGIONPercentage Points Contribution Relative Contribution, Percent
WORLD GROWTH1
1Sum of Regional Contributions Source: www.e-forecasting.com
Euro Area (euro17)
Non-Euro Members (10)
OTHER EUROPE
NORTH AMERICA
United States
SOUTH AMERICA
ASIA & PACIFIC INDUSTRIAL
EMERGING ASIA
China & India
MIDDLE EAST & AFRICA
Relative Contribution to Global GDP Growth
-10
0
10
20
30
40
50
60
70
80
2010 2011 2012 2013
EUROPEAN UNION (EU27)
OTHER EUROPE
NORTH AMERICA
SOUTH AMERICA
ASIA & PACIFIC INDUSTRIAL
EMERGING ASIA
MIDDLE EAST & AFRICA
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Market Size Measured by GDP in $PPP Billion: 2009 vs 2010
Pieces of pie remain similar, with following changes: • Emerging Asia (+2%)• North America (-1%)• Non-Euro (-1%)
16%
6%
6%
25%6%
10%
27%
4% Euro Area (16)
Non-Euro Area (11)
OTHER EUROPE
NORTH AMERICA
SOUTH AMERICA
ASIA & PACIFIC INDUSTRIAL
EMERGING ASIA
MIDDLE EAST & AFRICA
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Short term global forecast
-2
0
2
4
6
8
10
2010 2011 2012 2013
Euro Area (16)
Non-Euro Area (11)
OTHER EUROPE
NORTH AMERICA
SOUTH AMERICA
ASIA & PACIFICINDUSTRIALEMERGING ASIA
MIDDLE EAST & AFRICA
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Long term global forecast
Economic Growth as % Change in Real GDP from Previous Year
-2
0
2
4
6
8
10
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Euro Area (16)
Non-Euro Area (11)
OTHER EUROPE
NORTH AMERICA
SOUTH AMERICA
ASIA & PACIFICINDUSTRIAL
EMERGING ASIA
MIDDLE EAST &AFRICA
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Global Opportunities
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Q&A
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Wrap Up
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